Providing the capability to satisfy current and future demand is a fundamental responsibility of operations management. Get the balance between capacity and demand right and the operation can satisfy its customers cost-effectively. Get it wrong and it will fail to satisfy demand, and have excessive costs. Capacity planning and control is also sometimes referred to as aggregate planning and control. This is because, at this level of the planning and control, demand and capacity calculations are usually performed on an aggregated basis which does not discriminate between the different products and services that an operation might produce. The essence of the task is to reconcile, at a general and aggregated level, the supply of capacity with the level of demand which it must satisfy.

The most common use of the word capacity is in the static, physical sense of the fixed volume of a container, or the space in a building. This meaning of the word is also sometimes used by operations managers. For example, a pharmaceutical manufacturer may invest in new 1,000-litre capacity reactor vessels, a property company purchases a 500-vehicle capacity city-centre car park, and a ‘multiplex’ cinema is built with 10 screens and a total capacity of 2,500 seats. Although these capacity measures describe the scale of these operations, they do not reflect the processing capacities of these investments. To do this we must incorporate a time dimension appropriate to the use of assets. So the pharmaceutical company will be concerned with the level of output that can be achieved using the 1,000-litre reactor vessel. If a batch of standard products can be produced every hour, the planned processing capacity could be as high as 24,000 litres per day. If the reaction takes four hours, and two hours are used for cleaning between batches, the vessel may only produce 4,000 litres per day. Similarly, the car park may be fully occupied by office workers during the working day, ‘processing’ only 500 cars per day. Alternatively, it may be used for shoppers staying on average only one hour, and theatre-goers occupying spaces for three hours in the evening. The processing capacity would then be up to 5,000 cars per day. Thus the definition of the capacity of an operation is the maximum level of value-added activity over a period of time that the process can achieve under normal operating conditions.

 Many organizations operate at below their maximum processing capacity, either because there is insufficient demand completely to ‘fill’ their capacity, or as a deliberate policy, so that the operation can respond quickly to every new order. Often, though, organizations find themselves with some parts of their operation operating below their capacity while other parts are at their capacity ‘ceiling’. It is the parts of the operation that are operating at their capacity ‘ceiling’ which are the capacity constraint for the whole operation. It is these parts of the operation that are pushed to their capacity ceiling that act as the constraint on the whole operation.

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